Report 2018-301 All Recommendation Responses

Report 2018-301: Judicial Branch Procurement: Some Superior Courts Generally Followed Requirements but Could Improve Their Procurement Practices (Release Date: January 2019)

Recommendation #1 To: Superior Court of California, County of Santa Clara

The Santa Clara court should ensure that it supports all payments with a contract or purchase order that clearly states the terms and pricing for any goods or services received. The court should also ensure that it competitively awards its contracts as appropriate and that it properly documents its fair and reasonable pricing determinations, including those for applicable leveraged agreements.

1-Year Agency Response

Procurement provided training to the directors and managers of the Court on proper contract and procurement procedures. Topics taught and discussed pertained to the procurement process of the Court and the solicitation process and various methods we go out for bids for goods and services. Contracts and the process and procedures on proper contracting methods were also taught to the class. The directors and managers of the Court were educated on the importance of conducting solicitations for all goods and services and that contracts must be competitively bidded to find the correct vendor. The use of Sole Source for the contracts and all the certifications needed as part of the solicitation and contracting process

California State Auditor's Assessment of 1-Year Status: Fully Implemented

6-Month Agency Response

The Santa Clara Procurement department is creating procedures for how to handle contracts and MOUs for the Court to insure that there is always has a contract/MOU or purchase order that states the terms and conditions and pricing and services required by the Court from the contractors.

All goods and services required by the Court will undergo a solicitation process to find the best price and value for the Court. Contracts and purchase orders will reference solicitation documents and any sole source documentation and pricing determinations as justification for the purchase or contract. All LPA contracts that the Court wishes to engage with will undergo a price check to determine if the pricing is reasonable prior to the Court signing with the LPA. Training will be provided to the Court's directors on these new process and procedures.

California State Auditor's Assessment of 6-Month Status: Pending

60-Day Agency Response

- The Santa Clara Court is making sure that any future services provided or received by the Court has a Memorandum of Understanding (MOU) or contract in writing with other government entities. Internal education will be provided to the Court's officers to insure that they have a clear understanding of contracting practices with other government agencies.

- The Contracting Department will be conducting ongoing training to Court staff and officers to insure that all contractor services go through the Procurement Department and undergo proper solicitation procedures and Contracts are created with the vendor upon completion of the solicitation process.

- If a solicitation was not conducted for the goods or services acquired by the Court a sole or single source document will be created to state the reasons for the use of the contractor.

- On future usage of Leveraged Procured Agreements (LPA) the Procurement Department will conduct a pricing check to insure that the LPA pricing is fair and reasonable prior to engaging in a contract with the LPA provider.

California State Auditor's Assessment of 60-Day Status: Pending

Recommendation #2 To: Superior Court of California, County of Los Angeles

The Los Angeles court should ensure that it documents best value in its procurement files when selecting vendors from leveraged procurement agreements.

Annual Follow-Up Agency Response From October 2020

The Superior Court of California, County of Los Angeles will document best value in its procurement files when selecting vendors from leveraged procurement agreements.

California State Auditor's Assessment of Annual Follow-Up Status: Resolved

The Superior Court of California, County of Los Angeles, modified its forms to more clearly indicate whether a leveraged procurement agreement was competitively procured or not when selecting venders from such an agreement.

1-Year Agency Response

The Los Angeles court continues to follow the Judicial Branch Contracting manual by documenting best value when required.

California State Auditor's Assessment of 1-Year Status: Will Not Implement

Based on the absence of new information in its most recent response and on the LA Court's stated position in its earlier responses, we conclude that the Court will not implement this recommendation.

6-Month Agency Response

As mentioned in our original response, the Los Angeles court does follow the practice of documenting best value when required by the Judicial Branch Contracting manual.

California State Auditor's Assessment of 6-Month Status: Will Not Implement

In a letter to the State Auditor dated July 15, 2019, the Executive Officer of the Los Angeles court stated that no actions have been or will be taken to implement this recommendation. The Executive Officer disagreed with the finding, stating that 1) the Judicial Branch Contract Manual (contract manual) does not require documentation for each purchase from a leveraged procurement agreement and 2) the selected agreement was not a leveraged procurement agreement; it was an agreement resulting from a competitive procurement process. The Executive Officer also stated that when a court uses its own agreement, by contract manual definition, it is not a leveraged procurement agreement.

The Executive Officer's disagreement with our finding is misplaced, and we continue to stand by our audit work and our recommendation. First, the Department of General Services identifies master services agreements as a type of leveraged procurement agreement. We make this point on page 9 of our report. Second, the contract manual states that a leveraged procurement agreement generally refers to the establishment of such an agreement by a court that allows THE COURT [emphasis added] and other entities to procure goods or services from the contracted vendor. Finally, as we mention on page 9 of our report, "Although the judicial contracting manual does not identify the specific procedures a court should follow when making purchases under a leveraged agreement the court created, an underlying premise of the manual is that courts should obtain best value when acquiring goods and services. We therefore expected the Los Angeles court to have included in its procurement files evidence of which of the agreement's two vendors offered the best value for the goods acquired; however, it did not."

60-Day Agency Response

As mentioned in our original response, the Los Angeles court does follow the practice of documenting best value when required by the Judicial Branch Contracting manual.

California State Auditor's Assessment of 60-Day Status: No Action Taken

The Los Angeles court continues to miss a key point we made in our report. Namely, as we noted on page 9, "Although the judicial contracting manual does not identify the specific procedures a court should follow when making purchases under a leveraged agreement the court created, an underlying premise of the manual is that courts should obtain best value when acquiring goods and services. We therefore expected the Los Angeles court to have included in its procurement files evidence of which of the agreement's two vendors offered the best value for the goods acquired; however, it did not."

Recommendation #3 To: Superior Court of California, County of Monterey

The Monterey court should ensure that it documents fair and reasonable pricing from vendors in its procurement files.

60-Day Agency Response

In general, the court's practice has been to obtain at least three quotes for competitive and noncompetitive procurements and include the quotes in the procurement file (See Sections 5 and 6 on page 4 and Section 10b(VI) and (VII) on page 6 of the LCM). The court revised the Appendix III - Procurement Requirements Quick Reference section of the LCM to read "When considering the use of a LPA, even when the LPA was competitively bid, the Buyer should make an effort to seek better pricing and other terms with the vendor. The Buyer should include documentation on efforts made in the procurement file." The court is now following this practice.

California State Auditor's Assessment of 60-Day Status: Fully Implemented

Recommendation #4 To: Superior Court of California, County of Imperial

The Imperial court should ensure that it documents its justifications and approvals for using noncompetitive procurements.

60-Day Agency Response

We implemented this procedure on October 2011 to comply with the Judicial Branch Contracting Manual. The Court of Imperial process noncompetitive procurements based on the Judicial Branch Contracting Manual and our Local Contracting Manual.

California State Auditor's Assessment of 60-Day Status: Fully Implemented

Per the Imperial Court, it has always been its policy to document approval for noncompetitive procurements; the State Auditor's testing simply found instances where it did not comply. The court provided documentation associated with a recent procurement to demonstrate its current compliance.

Recommendation #5 To: Superior Court of California, County of Santa Barbara

The Santa Barbara court should ensure that it documents its justifications and approvals for using noncompetitive procurements.

60-Day Agency Response

Santa Barbara Superior Court agrees that the justification and approvals for using noncompetitive procurements must be clearly documented in all contract files. The court began utilizing the procurement summary at the inception of the procurement, which serves as a check-list, to ensure all contract file documentation is included in each procurement. The internal procurement forms, including the Non-Competitively Bid Justification and Approval Form, were updated and are posted on the court intranet for easily accessible use. The court is also documenting all noncompetitive procurements accordingly.

California State Auditor's Assessment of 60-Day Status: Fully Implemented

Recommendation #6 To: Superior Court of California, County of Monterey

The Monterey court should revise its guidance regarding invoice approval limits to include a description of circumstances under which it will allow exceptions to such limits, and it should inform court staff of the revisions.

60-Day Agency Response

The court revised Section 4 - Signature Authority on page 3 of the LCM to add Accounts Payable Approval signatories to the Authorization Matrix and update the signatories. As there are more than one allowed signatory for invoices up to $50,000 and to limit confusion and/or enhance clarity on these authorities, no allowance was provided for exceptions to the stated signatory authority. As noted previously, the court had already communicated to relevant court staff in November 2018 to remind them of the current invoice approval limits pending revision of the LCM and have also been informed of the approval limits now that the LCM revision has been finalized. The court has developed a PowerPoint-based procurement training and will initiate regular annual trainings in May 2019 for all relevant court staff as well as as-needed trainings for new relevant court staff to communicate these revisions, as well as maintain staff awareness of these policies in the future.

California State Auditor's Assessment of 60-Day Status: Fully Implemented

Recommendation #7 To: Superior Court of California, County of Santa Clara

The Santa Clara court should establish and implement procedures to ensure that adequate separation of duties exists for procurement. These procedures should specifically prevent a single individual from both approving an invoice's amount and then also authorizing its payment.

6-Month Agency Response

The Procurement and Accounting departments met on June 3, 2019 to discuss the current duties of the law library coordinator and the issues surrounding the processing of invoices which needed be moved back to the accounting department to comply with state auditors recommendations.

Both departments agreed to the return of the invoicing functions to the accounting department and discussed the new procedures to implement the change going forward. The Law Library Invoice Procedures were then modified to reflect the changes agreed on by both departments.

California State Auditor's Assessment of 6-Month Status: Fully Implemented

60-Day Agency Response

- The Santa Clara Court is reviewing its current approval structure for invoices and payments and revising it to clearly identify various authorization levels with various officers of the Court responsible for reviewing and approving Court invoices and payments. Insuring that backup personnel is assigned for each designated approver to avoid mistakes that took place in the past. The Court will also be restructuring its payment approval levels to clearly show each Court officers approval authority level and monitory thresholds for their level of authority. Future trainings will be provided to Court approvers that approving invoices and Court staff handling and entering goods receipts in SAP to insure that Court staff fully understands their duties and authorization levels.

- The Court is taking steps to identify and correct areas where separation of duties were crossed due to lack of staffing in the finance and procurement departments. Once these areas are identified the job functions will be routed back to the proper departments and separation of duties guidelines will be reviewed with staff to insure that these issues do not happen again.

California State Auditor's Assessment of 60-Day Status: Pending

Recommendation #8 To: Superior Court of California, County of Imperial

To ensure the appropriateness of every payment, the Imperial court should require all invoices to receive approval before it processes their payment.

60-Day Agency Response

We updated our procedure manual "Authorization of Expenses and Check Signing". All departments are following the appropriate internal controls.

California State Auditor's Assessment of 60-Day Status: Fully Implemented

Recommendation #9 To: Superior Court of California, County of Santa Barbara

The Santa Barbara court should reinstate its previous requirement that staff submit packing slips or receipts before its payment of invoices.

60-Day Agency Response

The Santa Barbara Superior Court agrees that better documentation should be used for the receipt of goods and services. The court reinstated its previous requirement that staff submit packing slips or receipts before the payment of invoices. Managers and supervisors were notified of the reinstatement of the policy, and the updated Receipt of Goods/Services (ROG) Form is posted on the court intranet for easily accessible use. Accounts payable holds the invoices, and contacts the appropriate staff for submission, until the proper documentation is received.

California State Auditor's Assessment of 60-Day Status: Fully Implemented

Recommendation #10 To: Superior Court of California, County of Santa Clara

The Santa Clara court should ensure that its staff abide by the judicial contracting manual's purchase card transaction limits, or it should document an alternative transaction limit in its local contracting manual.

6-Month Agency Response

On May 20, 2019 in response to the State Auditors recommendation or the Court's credit card thresholds limits the Procurement Department General Services Manager (David E. Florence) submitted a memo to the Finance Director (Walter Eissmann) outlining the suggested changes to the Court's credit card threshold limits for both the daily per transaction amount and overall transactions amounts. The memo was then taken by the Finance Director to the Chief Executive Officer (Rebecca Fleming) of the Court who approved the recommended increases to the credit card threshold limits.

Procurement department modified it's JBCL local contracting manual and added Section 6 Purchase Card Programs to the manual.

Date New changes went into effect May 31, 2019.

California State Auditor's Assessment of 6-Month Status: Fully Implemented

60-Day Agency Response

- The Santa Clara Court has reviewed its current local contracting manual's credit card limits and is making adjustments to its current amount thresholds for daily and individual transactions of some of the credit cards to better fit the Court's needs.

California State Auditor's Assessment of 60-Day Status: Pending

Recommendation #11 To: Superior Court of California, County of Imperial

The Imperial court should document its alternative purchase card procedures regarding transaction limits in its local manual.

60-Day Agency Response

We set an account Credit Limit of $5,000 and a single purchase limit of $1,500 for all cardholders.

California State Auditor's Assessment of 60-Day Status: Fully Implemented

Recommendation #12 To: Superior Court of California, County of Santa Barbara

The Santa Barbara court should document its alternative purchase card procedures regarding transaction limits in its local manual.

60-Day Agency Response

Santa Barbara Superior Court agrees that alternative procedures should be documented in the local contracting manual. The court made the decision to revert back to the standard purchase card procedures and reduced the per transaction limits on all cards to a maximum of $1,500. The excess limit was not necessary, and any purchases above $1,500 will go through the standard procurement procedures of a purchase order and/or contract. The credit card limits are stated within the revised Local Contracting Manual which is posted on the court intranet for all court staff to easily access.

California State Auditor's Assessment of 60-Day Status: Fully Implemented

All Recommendations in 2018-301

Agency responses received are posted verbatim.